Agents Should Do These 5 Things For FHA Appraisals

Avoid Headaches With These 5 Tips For FHA Appraisals

The market is hot and sales activity is increasing. If only we had more listings, right?

I’ve noticed recently in this frenzy of activity that those in the real estate industry, including mortgage lenders, agents, and of course appraisers, seem to be burning the candle at both ends. It’s easy to get ahead of ourselves and not be the most efficient.

One example of this that has happened to me lately is that homes have not been prepared for FHA appraisals. What this means is that agents have not prepared the house to meet HUD/FHA appraisal guidelines.

This can result in increased cost to the borrower due to reinspection and possible delays to the closing, something none of us want, right?

Today I’m going to share with you some of the things I’ve been seeing recently with FHA appraisals that require me to revisit the property, which as I said increases the cost to the buyer and may delay the closing.

Agents Should Do These 5 Things When Preparing Listings For FHA Appraisals

1) Make sure that all utilities are on and functioning – HUD requires appraisers to verify that all utilities are on and working like they’re supposed to. These utilities include electricity, gas, water, and sewer.

Appraisers must verify that the power is on and outlets are functioning. This is typically done by testing an outlet in each room as well as flipping light switches and turning appliances on and off.

Gas is verified to be working by turning on appliances such as the stove or by turning on the home’s heating system if it is gas-powered.

In addition, water faucets are turned on to check for water flow and pressure. Water pressure is checked by turning the water on at the same time as flushing the toilet to see if there is a reduction in water flow.

If the home has a septic system we must check to see if there are any signs of damage. If any damage is noted before the appraisal is done it should be repaired beforehand or the appraisal will be subject to it being fixed.

2) Verify that the water heater is on and working – This problem happened to me this week. I visited a house for an FHA appraisal and when I turned on the hot water there was none.

This particular house had recently been renovated and was vacant and it looked like the water heater was new. What most likely happened was that the breaker to the water heater had been turned off to work on it and it was never turned back on.

It’s not just a matter of the appraiser flipping the breaker switch and checking it because the water heater takes a while to heat up the water so it will require an additional visit to verify that it works.

3) Unstick windows – FHA/HUD requires that at least one window per room be operable if it is the only source of egress. If there is another way out of the house, such as with a door, then there is no requirements for the window to open.

The problem of stuck windows typically occurs with older homes that have wooden frames that have been painted shut. If the window is the only way out then it must be unstuck so that it will open.

Something else to keep in mind is how easy it is to open the window. While it may be possible to open you also have to keep in mind that this could be a young child’s bedroom so it should be easy enough for them to open it up.

4) Remove all peeling paint – Peeling paint is one of the most common FHA issues for older homes. Any home built prior to 1978 has the potential to have lead-based paint, which is dangerous if swallowed.

There are specific guidelines for removing the paint which I have covered in this prior post. As with all FHA requirements, it’s good to have them completed prior to the appraiser’s visit, or a reinspection will be required thereby increasing the cost and time to close.

5) Repair or replace broken appliances – Appliances are not necessarily required to be in the home, however, if they are present they must work.

If appliances are not present in the subject but they are in the comps there will be a downward or negative adjustment made to the comparable because they will be considered superior in comparison to the subject.

Here’s a tip for agents: if there are appliances in the home but they do not work, and you do not want to spend money on new ones, just remove them. Again, there will be an adjustment made to reflect the property not having appliances, however, you will not be out the money to buy new ones.

Conclusion

These items should be done before the appraiser visits the property so that the appraisal inspection can be performed without delays and all of the necessary FHA checklist items can be verified.

Question

Do you have any other questions regarding FHA appraisals? Feel free to contact me if you do and as always thanks for reading.

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